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Following the EU Referendum result in favour of Brexit, no one really knows what the future holds for the UK outside of the EU or what the impact will be on the remaining EU countries or the wider global economy. The only certainty is that things will
remain uncertain until the politicians plot a course through to our exit from the EU, new trade deals are struck, and companies reorganise their operations to reflect the new order. Short-term pain including lower growth, a possible recession, and
lower levels of company investment look likely in the UK.
Against this backdrop, law firms need to adopt the default fall-back position whenever economic turbulence arises, namely, a focus on their key clients.
When work is in short-supply – and whilst advice to clients on adapting to the changes resulting from Brexit will give a boost to income, this is likely to be offset by a fall in transactional work – firms need to protect the revenue
streams coming from their most important clients, because these will be under attack from their competitors, and winning new clients in a downturn is very difficult.
This will be the first in a series of blogs looking a
t how law firms implement effective key account management (KAM), which is about focusing the firm’s resources on a small number of its most important clients, understanding these clients’ needs, assembling a dedicated team of lawyers
for each client, and delivering an integrated, high-quality, value-adding service. If done well, these clients usually respond with increased levels of loyalty towards the firm resulting in repeat instructions, a greater share
of that client’s advisory spend, and increased levels of referrals and advocacy.
Regardless of whether you are a small regional player or a global firm, the first stage in establishing a KAM programme in your firm is to establish which are your key clients. This is not as easy as it might appear – I’ve seen many a firm
waste considerable amounts of time and effort just trying to agree a list of such clients.
Get a true picture of the 'largest' clients by fee income
Most firms start by drawing up a list of their largest clients by fee income, as losing any of these would expose the firm to considerable risk just in terms of needing to find replacement income. It is important to remember at this point to make sure
that all fee income is captured for a client entity by ensuring that fees from separate subsidiaries are aggregated at holding company and ultimate holding company level to get the clearest picture of your most important clients. I’ve seen many
practice management systems fail to do this.
Weed out 'one-offs'
It is also important to weed out ‘one-offs’, say, large pieces of litigation which are unlikely to be repeated in future years and where there are few if any other income streams which can be built on and exploited. Looking at fee income patterns
going back at least three years can also identify trends in fee income – falling, static or increasing – which can help in identifying whether a client is ‘key’.
Don't overlook future potential
Firms also need to consider those clients where they believe there is potential to greatly increase future income based on an understanding of the client’s needs and a strengthening client relationship. Beware of including clients just because of
their status, e.g. FTSE100 companies, but where the weakness of the relationship and their fondness for using larger law firms will mean you investing considerable amounts of effort for little if any reward.
There's no magic number...
Finally, I’m often asked how many clients should be in a KAM programme and of course there is no right answer. All I would say is start small and build. It’s a lot easier to manage a small number of key clients across a firm, and where I’ve
seen KAM fail in law firms it has often been because the programme was too ambitious at the start by including too many clients. Even for a large international firm with revenues in excess of several hundred million, a list of no more than 20 clients
would be a sensible place to start.
Kevin Wheeler is a consultant and coach with 30 years’ experience advising professional services firms, including those from the legal sector, on all aspects of business development. He has particular expertise in designing and implementing KAM programmes for law firms, and coaches client relationship partners and their service teams to deliver great client service.
0330 161 1234